Enterprise Information Summer I 2005-2006 LECTURE 5

Agenda Enterprise Planning Enterprise Resource Planning (ERP) & Enterprise Systems 11/23/2018

Enterprise Planning Stimulating the Future Enhancing the value of information done at the level of the people doing the work — not at the executive level A form of “gap analysis” What information do we have? What information would we like? What alternative do we have for getting the information that we don’t have? 11/23/2018

Assessing the Gap Alternatives EASE: Is the alternative easy to realize? POPULAR: Is it likely that the people involved will accept it? CHEAP: Are the costs for implementing the alternative reasonable? 11/23/2018

How do we start? Modeling the information that is deemed most important used now Is there additional information that would be useful? How would it be useful? Then ask the Ease/Popular/Cheap questions 11/23/2018

Hospital Information Model Current important Information Assets runs has has 11/23/2018

Focus on Patient Care (Scenario 1) Coordinating care of repeat visitors Key – finding relationships between visits 11/23/2018

Possible Information Assets: Patient Care GOAL – Providing educational info to patients for self-managing conditions MEANS – Finding patterns in frequency of conditions/treatments ??? – ease / popular / cheap 11/23/2018

Focus on Department & Facilities (Scenario 2) Looking at how well space is used and cost effectiveness 11/23/2018

Possible Information Assets: Department and Facilities GOAL – Better space utilization and cost effectiveness MEANS -- Revenues from visits Expenses from running facilities ??? – ease / popular / cheap Net revenues leases janitorial 11/23/2018

Possible Information Assets: Grants and Research (Scenario 3) Goal – Expanding the role of research Means – Gathering information on grants, funding agencies ??? – ease / popular / cheap 11/23/2018

University Information Model Problem: Demand not known after class closed 11/23/2018

Possible Information Assets: Enrollment Activity (Scenario 1) Goal – Determining Demand Means – Tracking Requests ??? – ease / popular / cheap 11/23/2018

Possible Information Assets: Larger Scope (Scenario 2) Expansion to information about Degree Programs for Course Demand 11/23/2018

Increased Information Value Planning Prioritization Tiers 11/23/2018

Prioritizing Potential Benefit Info easy to access? Info accurate? People trained to use? Policies encourage effective use? Positive results for users? 11/23/2018

Measuring the Effect Assumptions: Types of measures Goals are better than no goals Specific goals are better than vague goals What gets measured tends to get done Types of measures Quantitative – ROI – usually contrived Qualitative – Power of info assets to add value 11/23/2018

Measuring the Effect Lagging Indicators what has happened appears precise c/be inappropriate, when? Leading Indicators match direction sought helps keep ship on course 11/23/2018

Areas to measure for Balanced Picture Customer – what is our relationship Internal business processes (3 basics) Getting and paying for the inputs Converting inputs to salable product Delivering product/receiving payment Learning and growth areas (R&D) Financial stakeholders 11/23/2018

Exercise (next week) You are the IT steering committee that will decide which hospital project to fund. From last weeks readings and lecture detail the steps that you would take in determining which hospital project to do. Based on the previous session readings and lecture (Session 6) 1. What two questions would you ask to find out which one should be implemented? 2. How would you use the prioritization tiers decision tree? 3.  How would you use the Prioritizing Potential Benefit tree? 4.  What is the major problem with lagging indicators when developing new software? 11/23/2018

Enterprise Resource Planning (ERP) and Enterprise Systems 11/23/2018

Enterprise Resource Planning A structured approach to optimizing a company’s internal value chain. Packaged, application software (modules) designed to address common business functions (across industries) Evolved, in part, from MRP concepts Typically, vendors assume some customization and integration will be required Vendors also assume system infrastructure exists (including: RDB, client, servers, browsers, network, etc.) 11/23/2018

Evolution of ERP 11/23/2018

Common Features On-line system with no traditional batch interfaces One database for all data Clear definition of every data items Efficient support of back-office transaction processing; weak in decision support and analytical support Templates for processes of best practices Client/server computing, network infrastructure, RDB, GUI, Web Enablement Proprietary and tools (e.g. ABAP/4 for SAP R/3) 11/23/2018

Components of Traditional ERP 11/23/2018

Advantages Tight integration among all modules Single view of the business -- same db, consistent reporting and analysis Process orientation: streamline processes Rich functionality : templates & reference model Flexibility: current and new environment Scalability: small group vs. enterprise Expandability: modular vs. total systems Interoperability with 3rd party solutions Rapid implementation: “vanilla” version 11/23/2018

11/23/2018

Business Engineering (BE) vs. Process Engineering (BPR) BPR -- Process driven, use IT to automate existing or redesigned process. Difficult to find/build software for new process. BE -- utilizes IT for designing/redesigning processes, or entire value chains. Describe, simulate, or model organization. BE / Enterprise software impose its logic on organization Templates of best practices, e.g., SAP R/3 Reference Model 11/23/2018

The ERP Market: Key Decisions and Drivers Build vs. buy Single vendor vs. best of breed Drivers Year 2000 & EMU (Euro) The promise (integration, flexibility, etc.) Control maintenance costs (infrastructure, application) Re-engineering, shared services Competition 11/23/2018

Rapid ERP Deployments Advantages Disadvantages Up and running on ERP quickly Less staff time spent on project Less business disruption Can be lower cost over time Disadvantages Difficult to customize software to match business needs Small core group involved in implementation Insufficient understanding of business context and process Require more up-front preparation costs Limited support from IT staff 11/23/2018

Hidden Costs of ERP Training --software, process, roles, skills, 10-15% of total project budget Integration and Testing--process oriented Data Conversion -- data cleansing, outsourcing? Data Analysis--Warehousing? Consultants -- disengagement, knowledge transfer Total Cost of Ownership 3x-10x, cost per user? 11/23/2018

Post-ERP Activities First Stage (3-9 months) Productivity decline, redefining jobs, establishing new procedures, fine-tuning ERP software Second Stage (6-18 months) Skills development, structural changes, process integration, and add-on apps Third Stage (1-2 years) transformation 11/23/2018

ERP Business Benefits (expected) Operational Cost reduction, cycle time reduction, productivity improvement, quality improvement, customer services improvement Managerial Better resource management, improved decision making and planning, performance improvement Strategic (?) Support business growth, support business alliance, build cost leadership, General product differentiation, build external linkage, Worldwide expansion, enabling e-commerce Infrastructure -- enterprise data backbone 11/23/2018

More on Business Benefits IT Infrastructure Build business flexibility for current and future changes IT cost reduction Increased IT infrastructure capability Organizational Support organizational changes Facilitate business learning Empowerment Build common visions Change employee behavior Better employee morale and satisfaction 11/23/2018

ERP Value: Gap between Expected vs. Actual vs. Potential 11/23/2018

Traditional ERP vs. Extended Enterprise Systems 11/23/2018